1 / 14

FRANCHISING DEVELOPMENT FOR SMES IN NIGERIA: THE ROLE OF VENTURE CAPITAL

FRANCHISING DEVELOPMENT FOR SMES IN NIGERIA: THE ROLE OF VENTURE CAPITAL. Presented by : Mr. Kayode A. Ayeni MD/CEO, First Funds, Nigeria. At the International Seminar On Franchising by the Joint Africa Institute, Rabat, Morocco November 13-17, 2006. Outline Of Presentation.

feo
Download Presentation

FRANCHISING DEVELOPMENT FOR SMES IN NIGERIA: THE ROLE OF VENTURE CAPITAL

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. FRANCHISING DEVELOPMENT FOR SMES IN NIGERIA:THE ROLE OF VENTURE CAPITAL Presented by: Mr. Kayode A. Ayeni MD/CEO, First Funds, Nigeria. At the International Seminar On Franchising by the Joint Africa Institute, Rabat, Morocco November 13-17, 2006

  2. Outline Of Presentation • Background To SMEEIS • The New Venture Capital Industry • Benefits Of Venture Capital • Why Franchising Is Good For SMEs • Financing Franchising With SMEEIS funds • Benefits To Franchisor &Franchisee • Benefits To SMEEIS Fund Manager • Conclusions • How To Contact Us

  3. Background to SMEEIS • SMEEIS was introduced by Bankers Committee in June, 2001. • SMEEIS requires banks to set aside 10% of PAT for investment in Small and Medium Enterprises (SMEs).  • SME Investment Sectors : Every legal business activity is covered with the exception of trading/merchandising and financial services. • An SME total assets < N1.5billion (excluding land and working capital) • Funding provided shall be in the form of equity or loans, where loans are single digit (max of 9%). • Upper limit of 40% equity funding by banks shall apply. • The investment can be divested after a minimum period of 3 to 5 years. • Funds can be used for start-ups, expansion, working capital, management buy-out, turn around of moribund companies, etc.

  4. The New Venture Capital Industry • Introduction of SMEEIS has given birth to a new Venture Capital (VC) industry in Nigeria. • SMIEIS is set up for investment in equity, which has forced the acquisition of equity investment skills by banks (distinct from lending skills). • Many banks have either set up a unit in-house or set up VC subsidiaries (singly or jointly with other banks) to handle investment of their SMIEIS funds. • Some other banks have engaged independent VC fund managers to invest their funds.

  5. Benefits of Venture Capital • Impacts discipline and more accountability in company. • Risks are shared equally by all shareholders. • Source of medium to long term capital. • Investment is not secured (no need for collateral). • No interest is paid on Venture Capital funds. • Institutional partners lend credibility and acts as a positive signal to other stakeholders. • Venture Capitalist adds value in providing financial, technical, advisory and managerial support.

  6. Why Is Franchising Good For SMEs • By nature & origin, business arrangement designed by entrepreneurs for SMEs. • Quick replication of a good business idea • Easy start-up opportunities. • Facilitates institutionalisation of business. • Global success reports on franchising in development of small businesses • 17,500 franchise systems, 1.2 million franchisees & 12.5 million employees in franchise business globally. • In USA, half of all retail sales generated through franchised chains; 550,000 franchise outlets employing 7.1 million workers.

  7. Why Is Franchising Good For SMEs (contd) • U.S franchising industry estimated at US$1 trillion in 2001. • Industry growing at rate of 10-12% per annum. • MC Donald’s : 1998 – 16,000 franchises; 2002 –22,000 franchises. • Estimated failure of franchise outlets in U.S. less than 5%. • Estimated failure by fifth anniversary of new businesses in Nigeria more than 80%.

  8. Financing Franchising With SMEEIS Funds • SMEEIS Funds can support franchising. • Each franchise outlet – an SME- limited liability company with at most N1.5 Billion asset base (excluding land and working capital). • Resulting benefits to Venture Capital Fund. • Benefits also to Franchisor/Franchisee (Promoter).

  9. Benefits To Franchisor • Quick business rollout possible • Easier start-up opportunities • Creation of model outlets • Possibility of unlimited growth • Strong institutional partner • Upon exit of Venture Capital Funds, shares can be sold to Franchisee (s)

  10. Benefits To Franchisee • Leverage existing franchise goodwill. • Reduction in learning curve. • Easier break into relatively captive market- confirm/maintain (rather than build) existing franchise reputation. • Training & technology transfer by Franchisor. • Strong institutional partner. • Tried and tested systems plus independence of self employment.

  11. Benefits To SMEEIS Fund Manager • Facilitates deployment of funds. • Facilitates geographical spread of investments. • Reduces risk of business failure. • Provides good exit opportunities.

  12. Conclusions • Link between Franchising, SMEs and Venture Capital (SMIEIS) Funds established. • Franchising is a good method for achieving rapid growth of SMEs. • Venture Capital (SMIEIS) funding is beneficial to SMEs • The combination of franchising and SMIEIS funding for SMEs is a recipe for SME success.

  13. How to Contact Us All enquiries should be directed to: MD/CEO First Funds Limited Bull Plaza (ConOil Building) 9th Floor 38/39 Marina Lagos Tel: 234-1-2665211, 2665214, 2665250 Fax: 234-1-2660784. Website: www.firstfundsltd.com

  14. THANK YOU QUESTIONS (?)

More Related